Question

1. An issue of common 60,000 shares of common stock at $20 per share would be recorded as follows:

   	a.	Debit: Cash………………..…..……..1,200,000                   Credit: Common stock…………………1,200,000
   	b.	Debit: Common stock…..…......……..1,200,000                   Credit: Cash……………….……………1,200,000
   	c.	Debit: Cash………..…..…..…………1,200,000                   Credit: Stockholders’ equity……………1,200,000
   	d.	Debit: Cash……………..…..………..1,200,000                   Credit: Retained earnings………………1,200,000

Answer 1

A. Debit Cash A/C $1,200,000.

Credit Common Stock A/C $ 1,200,000.

( Being 60,000 common shares issued at $ 20 per share.)

Explanation:

Issue of common 60,000 shares of common stock at $20 per then total amount received $ 1,200,000 ( 60,000 shares × $20 per share ). So, debit cash with $ 1,200,000.

As 60,000 common stock is issued credit common stock with $ 1,200,000.

To record issue of common stock one cannot credit retained Earnings or stockholders equity. Stockholders equity is equal to sum of common stock , retained Earnings etc.

Option b can be used at time purchase of common stock.